Child Care & Family Leave Policy
read more about solutions for American families
Caregiving responsibilities can be a heavy burden for families, causing significant and profound emotional, financial, and physical strain. New parents, for example, are often forced to make difficult decisions between working and caring for their child. And, when parents do work, they need to know that their child is being cared for in a safe, healthy, and appropriate environment.
Not only does this significantly affect children and families, but it also greatly impacts our national economic growth and labor force participation. Without question, business productivity can suffer if parents sacrifice labor productivity because of limited caregiving options.
Currently, there are two primary Internal Revenue Code employer tax credits designed to help businesses offset the costs of providing family-focused benefits to employees.
The 45F Employer-Provided Child Care Credit was created in 2001 and made permanent in 2012 to encourage employers to provide child care. Qualifying expenses include constructing, improving, or operating child-care facilities; contracting with child-care providers; and providing referral services. Beginning in 2026, the One Big Beautiful Bill Act (OBBBA) increased the credit to 40 percent of qualifying expenses, or 50 percent for eligible small businesses, and raised the annual cap to $500,000 or $600,000, respectively.
Under the Family and Medical Leave Act (FMLA), covered private employers generally must provide eligible employees up to 12 weeks of job-protected, unpaid leave for events such as the birth or adoption of a child, caring for a seriously ill family member, or an employee’s own serious health condition. Employees generally must have worked for the employer for at least 12 months and 1,250 hours during the preceding year.
The 45S Employer Credit for Paid Family and Medical Leave helps employers offset the cost of providing paid family and medical leave. The wage-based credit covers up to 12 weeks of qualifying leave and ranges from 12.5 percent to 25 percent of qualifying wages, depending on the percentage of wages replaced.
The OBBBA made the 45S credit permanent and expanded it beginning in 2026. Employers can now claim the credit based on qualifying paid-leave insurance premiums instead of wages, and the minimum employee tenure requirement was reduced from 12 months to six months. The law also allows state- or locally mandated leave to count toward certain eligibility requirements, although amounts required under those mandates generally cannot themselves be claimed for the federal credit.
1787 believes the best way forward is a plan that combines regulatory reform + employer incentives + provider loans and loan guarantees + narrowly targeted assistance for lower-income families. This way, we can increase the supply of child care and leverage private investment before resorting to large government subsidies.
To that end, 1787 supports the 45F Employer-Provided Child Care Credit and the 45S Employer Credit for Paid Family and Medical Leave. But more can be done.
1787 Plan of Action: Child Care & Family Leave
Expanding the Child Care and Development Block Grant (CCDBG). CCDBG provides child-care assistance to lower-income working families, directly reducing what eligible parents pay for care. We would increase funding and expand eligibility for low- and moderate-income families while keeping assistance means-tested.
Our design makes the subsidy portable across approved early-childhood providers, meaning the money follows the child. Eligible parents receive a means-tested child-care benefit that may be applied toward a private child-care center, family child-care home, nonprofit program, or participating public or private pre-K program. To prevent double-dipping, the subsidy would be reduced by any other public funding already covering the same hours of care.
This is a great way forward because, rather than creating a separate universal pre-K entitlement, would help families afford the provider they choose, while using existing public and private child-care infrastructure.
Targeted loans or loan guarantees for child-care providers. The federal government can help providers open new facilities or expand existing ones without bearing the full cost. Loans would generally be repaid, while federal loan guarantees could encourage private lenders to finance expansion with relatively little upfront government spending (although taxpayers would assume some risk if borrowers default).
Cutting unnecessary barriers to affordable child care. Our underlying principle is simple: Keep the rules that protect children; reform the rules that merely make child care harder to provide and more expensive to purchase.
States should maintain rigorous health and safety protections for children while eliminating regulations that unnecessarily increase costs or restrict the supply of care. 1787 would offer federal incentives for states to review their child-care regulations and streamline licensing, permitting, zoning, duplicative inspections, and other requirements that cannot be justified by a meaningful health, safety, or quality benefit. States should also make it easier for qualified home-based providers to enter the market, expedite applications from providers with strong compliance records, and simplify the process for successful providers to expand or open additional locations.